Sunday Times

Could you save cash by giv­ing up your car?

The an­swer in­volves weigh­ing your costs and al­ter­na­tives

- By AN­GELIQUE ARDÉ ardea@ti­soblack­ Business · Driving · Cars · Consumer Goods · Money Tips · Driving Advice · Lifehacks · Uber · Cape Town · Toyota Corolla · Toyota · Toyota Motor Corporation · Audi · Audi A4 · Kia Morning/Picanto · KIA Motors

● When you count the costs, es­pe­cially in light of the lat­est petrol-price hike, you re­alise just how ero­sive car own­er­ship is on per­sonal-wealth cre­ation.

Would you be bet­ter off sell­ing your car and us­ing a ride-shar­ing ser­vice such as flx or a ride-hail­ing ser­vice such as Uber, or down­grad­ing to a cheaper car?

As an il­lus­tra­tion of one per­son’s mo­bil­ity spend, con­sider Bill, who drives a VW Polo 1.6 val­ued at R250,000. His in­stal­ment is about R2,500 a month. He spends R800 a month on petrol. His of­fice park­ing costs him R750 a month and in­sur­ance R900 a month. He puts away R500 a month for main­te­nance. His car is de­pre­ci­at­ing at a rate of R1,500 a month. This amounts to R6,950 a month.

If Bill used flx, his com­mute to work could cost him R1,600 a month. Flx links em­ploy­ers to cor­po­rate-shut­tle providers, which then trans­port em­ploy­ees be­tween their homes and work in Wi-Fi-en­abled ve­hi­cles. Pur­pose-built for ride-shar­ing, flx works out your mileage and charges you ac­cord­ingly. If the cost of park­ing is in­cluded in your salary pack­age, your com­pany could sub­sidise your travel ex­penses to this amount.

Justin Coet­zee, CEO of GoMetro, the com­pany that de­vel­oped flx, says the as­sump­tions used in Bill’s case in­clude de­pre­ci­a­tion of about R90,000 over five years and fuel con­sump­tion at just un­der R1/km. Since the stats are about six months old, he says Bill’s ac­tual costs are prob­a­bly higher.

Flx is sub­si­dis­ing a pi­lot pro­gramme with three staff mem­bers of a Cape Town-based as­set man­ager.

Coet­zee says that while none of the par­tic­i­pants have sold their cars, they’re sav­ing “a small for­tune”.

“They’re also scor­ing by not do­ing mileage or in­cur­ring the costs of wear and tear, and could be sav­ing on in­sur­ance.”

One of the par­tic­i­pants is a busi­ness con­sul­tant, who says she gets 90 min­utes of work done ev­ery day in the shut­tle.

Coet­zee says em­ploy­ees who have to fight their way through peak-hour traf­fic or en­dure de­lays us­ing pub­lic trans­port ar­rive at work stressed. Then, over cof­fee, they catch up with col­leagues and check so­cial me­dia be­fore set­tling down to work, all of which is coun­ter­pro­duc­tive. In a shut­tle, they get time to catch up with col­leagues, and an­swer per­sonal e-mails and mes­sages be­fore they get to work, and so are able to start work­ing while en route.

Max Popescu, an ac­tu­ary at Vir­tual Ac­tu­ary, is a ve­hi­cle-less Uber user. He says the value of your time is one of the most per­ti­nent fac­tors when weigh­ing the costs of your travel. “Are you more pro­duc­tive as a re­sult of not hav­ing to drive, or less stressed as a re­sult of not deal­ing with traf­fic?”

Last year MyTrea­sury, an in­de­pen­dent price-com­par­i­son web­site, worked out that if you drive a fully fi­nanced Toy­ota Corolla (the car most com­monly used by UberX driv­ers), val­ued at R300,900, for about 40km a day (the av­er­age mileage done by car own­ers in SA), it would cost you about R111,000 a year.

Trav­el­ling the same dis­tance in an UberX would cost you R20,000 more.

How­ever, if you fac­tor in the value of your time at R2.50/km and spend half of your jour­ney work­ing, you would save R14,000 a year by us­ing Uber. The value of time per kilo­me­tre is based on an an­nual in­come of R320,000, which trans­lates to an hourly rate of R150.

When Popescu up­dated these fig­ures — to ac­count for the cost of a Toy­ota Corolla 1.8 Pres­tige (R328,000) and a fuel price of R16.10/l — the an­nual cost of own­ing such a car would be R117,000.

Us­ing Uber in­stead, you could save R22,000 a year if you place the R2.50/km value on your time. Con­sider also that many of the costs of own­ing a car are fixed and un­af­fected by dis­tance trav­elled, Popescu says. De­pre­ci­a­tion and fuel are ex­cep­tions, be­cause these ac­cel­er­ate with dis­tance trav­elled.

How­ever, with Uber you pay only for dis­tance trav­elled. If you don’t use it, you don’t pay. Ef­fec­tively, own­ing a car makes sense if you travel long dis­tances, he says.

“This nat­u­rally leads to a break-even point, or a point at which you should be in­dif­fer­ent to ei­ther own­ing a car or Uber­ing,” Popescu says. This does de­pend on the car you drive, but petrol con­sumed is built into the cal­cu­la­tion.

“If you take into ac­count the value of your time, the break-even point for the driver of the Toy­ota Corolla is ap­prox­i­mately 50km a day. If you don’t ac­count for the value of your time, it is shy of 35km a day.

“So, though the cost of an Uber stays at R9/km, the cost of own­ing a car — in this case a Toy­ota Corolla — varies be­tween R26.50/km and R4.20/km, depend­ing on whether you drive 10km a day or 90km a day.”

The type of car you drive is also cru­cial. The cheaper the car is to own and run, the less likely that Uber­ing will be worth it.

Based on cal­cu­la­tions by Popescu, the break-even point for some­one driv­ing an Audi A4 2.0 TDI is 46km a day, as­sum­ing the driver is not plac­ing a value on their time. If they are, it’s 70km a day. In a Toy­ota Corolla 1.8 Pres­tige it’s 33km a day and 50km a day, re­spec­tively. For a Kia Pi­canto, it’s 18km a day and 27km a day re­spec­tively. This is as­sum­ing that the driv­ers all place the same value on their time.

When it comes to the ques­tion of whether you should down­grade to a cheaper car, con­sider a num­ber of is­sues, in­clud­ing whether you have paid off the ve­hi­cle, the re­sale value, the cost of buy­ing a cheaper ve­hi­cle, and run­ning costs.

A smaller, cheaper ve­hi­cle will cost less in fuel, in­sur­ance and main­te­nance, and your de­pre­ci­a­tion will be lower.

Re­mem­ber that what­ever you have lost in de­pre­ci­a­tion on a more ex­pen­sive ve­hi­cle, you are un­likely to re­coup, re­gard­less of whether you sell the ve­hi­cle now or later.

Popescu says in­dica­tive costs, based on spe­cific fi­nanc­ing terms, show the dif­fer­ence for fi­nanc­ing, de­pre­ci­a­tion and in­sur­ance pre­mi­ums alone be­tween dif­fer­ent cars. For ex­am­ple, an Audi A4 is about R8,100 a month, whereas the monthly cost of own­ing the Toy­ota is R6,100 and the Kia R3,400.

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 ?? Pic­ture: Sim­phiwe Nk­wali ?? When fig­ur­ing out what driv­ing to work and back costs you, you should fac­tor in the value of your time, ex­perts say.
Pic­ture: Sim­phiwe Nk­wali When fig­ur­ing out what driv­ing to work and back costs you, you should fac­tor in the value of your time, ex­perts say.
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